Carmageddon for Ford in the US, China and Europe


The new scam and fuel economy scandal is just a bubble.

It's tempting to believe Ford's Carmageddon is a new "dieselgate" after Ford announced last night that "a handful of workers have raised concern" about fuel economy and emissions testing procedures. Sure, Ford can get nailed. It is incredible to try to make the villain less painful by announcing a series of actions and self-indicating for this disaster – well, the "possible worries" – to the EPA and the California Air Resources Board instead of covering it.

Ford may need to pay fines and deal with lawsuits. This – along with other automakers – has already caught a red hand overestimating fuel economy. No problem. She got through these redundancies. Volkswagen got through dieselgate. Other automakers spend or have already installed their own dieselgates. Mismanagement of companies can be costly. But it blows over.

Reducing sales of vehicles is more difficult to correct.

This scandal is just a problem with Ford's global problem. Sales of vehicles have been declining in Europe since 2008. They have virtually collapsed in China over the past two years. and fell into the US in the last three years.

In addition to the test strike revealed last night, Ford also submitted its annual report (10-K). It includes verified numbers, including worldwide annual sales of vehicles – the number of vehicles Ford has sold to its dealers (who then sell and "deliver" to their customers).

Ford's sales in China have collapsed

Ford's annual sales through its joint ventures in China – by far the largest car market in the world where GM sells more vehicles than in the US – peaked in 2016 to 1,297 million vehicles, according to Ford's 10-K. But in 2018, Ford sold only 731,000 vehicles. Two years fall 44%.

In all carmakers, the number of vehicles sold in China dropped by 4% in 2018 as the steady start disappeared from a sharp fall in the second half. The 2017 was a record year for the automotive industry. For Ford, both years were Carmageddon. His sales in 2018 were not much higher than his sales in 2012:

US sales to the US declined for the third consecutive year.

In 2018, Ford sold 2.54 million vehicles in the US, according to its 10-K. It was for the third consecutive year that sales declined, reducing the overall drop to 5% from its peak in 2015. Thus, the volume of 2018 is lower than in 2013:

Managing Director Jim Hackett, promoted by Ford in May 2017 from Silicon Valley in Ford Smart Mobility, runs around the media circuit and analysts by suspending the Fitness Redesign rebuilding plan after the predecessor his fiercely plaguing hands, dropping his own disposals-and-costs restructuring plan before dismissing. These plans come with many billions of dollars in write-offs.

The idea of ​​smart mobility, the former Hackett concert, is to compete with Uber and Google and nothing. The unit hosts, among other things, self-management operations and a jewel named Chariot Transit, a Ford-based transport service that was acquired at the end of 2016. At that time, a few trucks ran around San Francisco to transport people between residential areas of tech-jobs. It then expanded to other cities and countries. It competed directly with city buses. A month ago, the high-tech business was closed. These kinds of things drive away a car industry.

The long-term decline of Ford of Europe

When the Eurozone crossed the financial crisis and the subsequent euro debt crisis, Ford sales fell 37% between 2008 and 2013. They were then recovered. In 2018, sales rose to 1.44 million vehicles. A huge feat for a company whose global sales are engraved. But sales in 2018 were still below 16% since 2008:

Ford's global car sales have fallen by 10% in two years

Ford sells vehicles all over the world, North America, South America, Europe, Russia, Turkey, Asia and the Pacific, the Middle East and Africa. These "Total Company" sales reached 2016 and then fell by 10% to 5.98 million vehicles. This puts sales just above those that were made in 2012 and 2011:

So just increase prices.

How does Ford try to keep sales in dollars from getting the same steep track of its unit sales? Keeping prices. And executives are horny for it to support swooning stocks.

The metric tossed around is the average transaction price – the price at which the vehicle is sold to consumers after negotiations. During the fourth quarter call, executive VP James Farley, Jr., boasted the "two-digit rise in transaction prices in the last quarter" for the Escape and Focus models. and CEO Hackett boasted for the take-off transaction prices to be "about $ 2,000 above the department's average."

Raising prices by reducing volume to cover the drop in volume is not an elegant solution for the long term.

Wait for unwanted.

Last August, Moody's cut Ford in Baa3 with negative prospects. This is Moody's lowest rating for investments (here is the rating rating scale for the three major US rating agencies). Moody's reported the erosion of "Ford's global business position and the challenges faced by the Redesign Fitness program," which comes at a cost of about $ 11 billion.

A downgrade to "garbage" will make borrowing more costly and will cause a multitude of problems for Ford. So he tries to keep his margins intact by raising prices and doing other things to convince rating agencies not to cut it into rubbish.

But the real problem is Ford's car sales. This is the core of his business. The fact that Ford seems to have difficulty finding Any buyers for its vehicles in China, that in the US their sales are reduced for three years and that in Europe the fall has been going on for over a decade: this is the real Carmageddon for Ford, not the evolving fuel emissions – the scam of scams economically , for which he will slap the wrist in the worst case scenario. But with these reductions in vehicle sales, year after year, good luck.

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